I've written about Brazil pre-Lula and post-Lula and spent the last five years covering all aspects of the country for Dow Jones, Wall Street Journal and Barron's. Meanwhile, for an undetermined amount of time, and with a little help from my friends, I will be parachuting primarily into Brazil, Russia, India and China. But will also be on the look out for interesting business stories and investing ideas throughout the emerging markets.

For Many, 'War' Already Happening In Ukraine

The media love a good war. Especially one involving a former Soviet nation, run by an ex-KGB agent, once seen in the Russian woods without a shirt and brandishing a shot gun.

Tensions between Moscow and Kiev are heating up over the secession of Crimea, a Black Sea peninsula once owned by Ukraine until March 16. And now it’s the industrial city of Donetsk, apparently aching to follow in Crimea’s footsteps.

The West says the secession talk is all being puppet mastered by Moscow. Moscow says that this screenplay is being written by the West and their billionaire cronies, now in position to run – or ruin — the Ukrainian economy and turn it into a NATO outpost on the Russian border. Who is right is anybody’s guess. In war, like in love, the truth is often unspeakable.

On Monday, a draft U.N. report on human rights in Ukraine was reviewed and reported on by Foreign Policy magazine’s U.N. reporter, Column Lynch. The magazine’s headline suggests Russia “rigged” the March 16 referendum in Crimea. The evidence includes Ukrainian television broadcasts being “shut off” in Crimea 10 days prior to the vote and being replaced by Russian TV channels supporting secession. Bloggers, activists and other critics of Russia were threatened, detained, and tortured, Lynch wrote. A delegation of human rights monitors “received many reports of vote rigging,” according to the U.N. assessment.

Ukrainians stage small protest in London on March 3, 2014. “NATO Save Ukraine” — nails on a chalkboard for Vladimir Putin, as the Moscow-Kiev political imbroglio now involves Brussels, Washington…and the markets. (Photo by David Holt)

“The delegation met with sources who claimed that there had been alleged cases of non-Ukrainian citizens participating in the referendum as well as individuals voting numerous times in different locations,” U.N. report author Ivan Simonovic, assistant secretary general for human rights, said in his report. “Preliminary findings, based on publicly available information as well as reports from civil society representatives in Crimea, suggest that the referendum on March 16 raised a number of concerns in terms of respect for human rights,” he said.

That’s a little different than being rigged. Not to suggest the Russians are entirely innocent here, U.S. elections have also faced reports of abuse of voting rights in minority neighborhoods. But that doesn’t mean the voting there was rigged to favor a particular outcome.

FORBES did not have access to Simonovic’s report and Lynch does not use the word “rigged” anyway except in the headline.

The Market Vectors Russia (RSX) exchange traded fund was the worst performing BRIC market ETF on Monday, down by more than 2.2%. Russian equities are down 20.2% year-to-date, while the MSCI Emerging Markets Index is up 0.2%.

The ruble is also weakening, but is still a healthy distance from its 36.55 low on the Friday before the Crimea vote.

Bending Instead Of Breaking

Ukraine and Russia’s relationship has been in hot water for years. It over-boiled late last year when Russia friendly president Viktor Yanukovych rejected a trade deal with the European Union in favor of moving the country closer politically and economically to Russia. Millions protested in Kiev, the nation’s capital, calling for Yanukovych to step down. They said that the president was operating on behalf of a foreign power rather than for the common good of Ukraine.

On Feb. 22, Yanukovych was removed from office by extra-legal means and replaced by two pro-Westerners, one being the well known Arseniy “Yats” Yatsenyuk.

Yats first made headlines last year when Victoria Nuland, assistant secretary of state for European affairs, reportedly said “Yats” was the man Washington preferred to lead Ukraine. Her comment came from a leaked telephone conversation with the American diplomat for Ukraine, Geoffrey Pyatt. The call did not help Washington’s cause to appear unbiased in Ukrainian affairs. And Moscow sees Yats’ role as Prime Minister of a NATO nation-in-waiting, if anything.

A not-so-new daily scene throughout Ukraine. Riot police block access to Khreschatyk Street in Kiev during this year’s Euromaidan protests that called for the ouster of its pro-Russian government in favor of a pro-European one. They got their wish. But lost pro-Russia Crimea as a result, and increased social unrest along the Russian border. (Photo by Mac Ivan)

“We continue to advise clients that Ukraine is the primary macro variable driving financial markets at the moment,” said Vladimir Signorelli, president of macro research firm Bretton Woods Research LLC in Mt. Tabor, N.J.

For Signorelli, Ukraine and Russia are a potential drag, especially if sanctions become economic. The U.S. has not financially punished Russia yet for annexing Crimea, nor has the European Union. However, E.U. decision makers have their hands tied in this regard. They are not as free to move on economic sanctions. Russia supplies around 30% of Europe’s natural gas. Not that the E.U. is the recipient of any type of discount from Russia’s GazpromGazprom, but if Russia feels threatened, it could retaliate with price hikes, or worse — turn off supply.

Gazprom has already increased its gas prices to Ukraine, but that was to be expected. Gazprom was delivering natural gas to Ukraine’s Naftogaz state owned gas distributor at prices well below the market. But since Yatsenyuk took the helm, Gazprom has had no incentive to honor its subsidized pricing. Moreover, Nafto owes at least $2 billion to Gazprom, so this tension a problem just waiting to worsen. On Monday, Gazprom shares fell by 2.24% on the Micex in Moscow.

The market was convinced Gazprom would raise rates, but has not yet priced in the fact that it might not get paid. Since the Monday after the Crimea vote, Gazprom equities are up 11.14%.

Now, the latest chapter in the Russia-Ukraine fist fight is taking place in the industrial city of Donetsk, located on the eastern border with Russia. Apparently, the city leaders no longer want to be part of Ukraine’s future. This will be easier said then done because while Crimea was majority ethnic Russians, Donetsk is split fairly evenly between ethnic Russians and Ukrainians, many of which might not look at Mother Russia with motherly love.

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